RAVIKANTH JELLI,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(1), HYDERABAD

PER Smt. P. MADHAVI DEVI, J.M. : This is assessee’s appeal for the AY. 2014-15, against the order of the Commissioner of Income Tax (Appeals)-5, Hyderabad, dated 24-01-2018.

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for verification. Since the assessee could not produce the books of account and the expenditure vouchers in support of his claim arrive at the net profit, the Assessing Officer rejected the same and proceeded to estimate the income of the assessee at 5% of the goods put to sale and brought it to tax.

2.1. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the Assessing Officer and assessee is in further appeal before us, raising the following grounds of appeal:

“1. The order of the Hon'ble CIT(A) is erroneous in law as well as facts of the case.

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“5. Having regard to the rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income at 5% of the cost of goods sold, while the assessee is seeking the estimation at 3% of the cost of goods sold. We find that in the case of Venkateswara Wines, Nizamabad (supra), the Coordinate Bench of this Tribunal has taken note of the decision of Hon’ble High Court of Telangana and Andhra Pradesh in the case of CIT vs. Kamlekar Shankar Lal (supra) to hold as under :

“6. Having regard to the rival contentions and the material on record, we find that the AO has called for books of account of the assessee but the assessee had failed to produce the same. Therefore, AO had estimated the income of the assessee at 2.5% of the turnover. The CIT wants the same to be estimated at 5% of the total turnover because the Tribunal in the case of an assessee carrying on the same business of sale of IMFL has estimated the income at 5% of the turnover. This, in our view, is not justified as held by the Coordinate Bench of this Tribunal. The uniform net profit cannot be adopted in each and every case of similar business. Estimation of net profit must be on the basis of facts involved in each and every case. Therefore, in our view, there is no error committed by the AO in estimating the profit at 2.5% of the total turnover. Thus grounds of appeal No.2 & 3 are allowed.”

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5.1. In the case before us, the assessee is agreeable to the estimation of income at 3% of the cost of goods sold. As the facts before us are similar to the facts before the Tribunal in the case of Venkateswara Wines, Nizamabad (supra) and the uniform rate of profit cannot be adopted in the case of every assessee in similar business, we allow ground No.2 of the assessee”.

3.1. Respectfully following the same, Ground Nos. 2 to 6 raised by assessee are allowed.

3.2. Ld. Counsel for the assessee submitted that Ground No. 7 does not arise from the assessment order, hence the same is rejected.

Order pronounced in the open court on 13th March, 2019

Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 13th March, 2019 TNMM

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